Retirement savers want help (and their interest in financial advice has doubled)
Not only does this finding from a new survey bode well for advisors, but it bolsters the bridge between employers and advisors, making collaboration toward better retirement outcomes more organic.
Retirement savers in the United States are showing they are receptive to financial advice while they struggle with fears tied to the uncertainty of inflation and market volatility, according to the new Global Retirement Reality Report (GR3) from State Street Global Advisors.
Compared with prior GR3 surveys, and potentially in response to the inflationary times, respondents’ inclination to seek financial advice has doubled, according to the new report. Some specifics: 68% of Americans fear that inflation will derail their retirement plans and 33% are worried about covering major unanticipated costs during retirement, such as medical or housing expenses. Meanwhile, 68% of U.S. respondents say that they would value a retirement income solution offered by their financial advisor.
With savers motivated to seek outside expertise, advisors have an important opportunity to engage with them, said Brendan Curran, head of defined contributions for the Americas for State Street Global Advisors.
“Being transparent, staying curious and orienting around clients’ needs are best practices for financial advisors in every market climate, but have particular resonance in today’s environment,” Curran said.
Curran said addressing the financial challenges in today’s marketplace is a key step for advisors to take with clients, and he noted that staying current on regulatory policies and investment products will ensure advisors “are better prepared to guide savers through the more technical terrain of today’s marketplace.”
“Open conversations with clients about the impacts of inflation and market volatility create a starting point for solutions-oriented discussions – and deepen clients’ trust,” Curran said.
Related: 80% of employees are unprepared for retirement: Employers should do more
Retirement hopes and expectations can vary a great deal among savers, and Curran noted that “financial advisors cannot assume that their clients have a shared vision of retirement.” For instance, 30% of respondents said they expected to retire someday, assuming they can catch up on savings, while 29% say they think they have saved enough to enjoy a traditional retirement. Meanwhile, 25% expect to only partially retire and continue working in some capacity.
“Financial advisors need to understand their clients’ vision of the future so that they can strategize the financial steps to get them there,” said Gregory Porteous, head of defined contribution intermediary strategy at State Street Global Advisors.
Curran said the Global Retirement Reality Report tracks how much flexibility savers are seeking in a retirement income solution vs. how much security they want. Respondents are given a range of options that spans from total access to retirement savings – an option that could lead to outliving your savings – to a fixed income guaranteed to last a lifetime but with a severe limit on liquidity.
The most popular option globally in 2022 was a hybrid approach that allowed financial flexibility in early retirement (ages 65 to 80) and stability later (after age 80) – 41% of Americans chose this approach, while 32% chose fixed security and 27% preferred total flexibility. Curran said managing flexibility and security “is about maximizing one’s lifestyle wants and needs.”
“Financial advisors can help to set the dial between flexibility and security and incrementally adjust it, depending on savers’ wants and needs as well as market conditions,” he said.
4 key employer-offered resources
Respondents pointed to four employer-offered resources as key ones to aiding the transition to retirement – the availability of a guaranteed income product, such as an annuity; one-on-one financial consulting; retirement planning tools, such as retirement income calculators; and educational forums. Of those options, 67% of respondents said accessing a guaranteed income product such as an annuity through their employer would be the most valuable resource.
Curran said 73% of U.S. respondents ranked workplace-sponsored defined contribution plans as their primary vehicle for retirement saving. With an option to keep savings in-plan during retirement, 52% said they would most likely stay in-plan rather than withdraw their accrued savings or transfer it elsewhere.
“State Street believes that retirees who keep money in an employer-sponsored plan stand to gain from institutional plan pricing — which, due to economies of scale, is generally lower than retail fees — as well as vetted investment options, curated resources and oversight from a familiar fiduciary able to support the transition from retirement saving to spending,” Curran said. “These benefits can work together to increase participants’ sense of security.”